Polkadot

Introduction to Polkadot

Meet Polkadot, the ambitious blockchain that’s trying to transform the crypto world.

CryptoMeister is going to walk you through the world of Polkadot and even teach you how to buy Polkadot.

So, fasten your seatbelts, stow your tray tables, and prepare to learn all about Polkadot.

Whether you’re brand-new to Polkadot or you’re a Polkadot veteran, we’re pretty sure that we can teach you a thing or 2!

Let’s do this!

The complete guide to buying Polkadot (DOT)

Polkadot officially launched back in 2016, but its own blockchain has only been live for about a year now.

Simply put, Polkadot is a next generation blockchain that allows users to connect multiple blockchains into one all-powerful blockchain.

It was founded by the Web3 Foundation, and is being used to develop the next generation of blockchain technology.  

Dr Gavin Wood is the leader of the Web3 Foundation and rose to fame for his role in developing Ethereum, the Solidity programming language and founding Parity Technologies.

By making use of sharded multi chain networks, Polkadot can process thousands of transactions in parallel.

This makes it infinitely scalable and gives it the power it needs to rise to the top as a big player in the blockchain world.

Polkadot began life with a cap of 10 million coins, but it underwent a redenomination to avoid the use of small decimals – like we see in Bitcoin.

During the redenomination, an allocation of 1 billion DOT tokens was set.

Balances increased but distribution and proportional share did not change.

What is Polkadot and how does it work?

Polkadot is a truly next generation blockchain, and it’s being heralded as the biggest creation since Ethereum.

But, such a powerful and ambitious blockchain isn’t going to be simple to wrap your head around.

So, to make life simpler we’re going to explain everything for you so that you can be a Polkadot pro!

First up, Polkadot has a sophisticated user-driven governance system.

This means that proposals for upgrades are put to the community, and you can then use your DOT tokens to vote.

Once a quorum has been reached on each item, action will be taken.

Communities that develop their own parallel chain (Parachain) linked to another blockchain can also use this voting mechanism to govern their Parachain.

So, let’s say that you, Dave and Rose create your own Parachain and bridge it with Ethereum so that you can play with DeFi on Polkadot.

You’ll be able to use Polkadot’s governance system to allow your community and followers to vote on what features you add next or which direction you take your Parachain in.

Think of Parachains as creating your own sub-blockchain like a sub-Reddit.

You can add as many Parachains as you wish, and they’re relatively cheap to launch.

However, as more Parachains launch, the validator density will drop.

This in turn will make the network become slower owing to the consensus mechanism.

If this does happen, it could become an issue for Polkadot, so it’s imperative that the price to create new Parachains scales in parallel with the validator density.

These custom blockchains are developed through a framework known as Substrate.

You can use the Substrate framework to incorporate all the perks of Polkadot with your own Parachain, which gives you almost infinite possibilities and potential.

Let’s say that you want to include fork-free upgrades – that can be done thanks to the Substrate framework.

In fact, this is a core feature of Polkadot.

There will never be a fork or hash was in the Polkadot world because it uses a Wasm binary that allows the network to upgrade using the governance mechanism – community voting.

Polkadot uses a nominated proof-of-stake (NPoS) consensus mechanism to select nominators and validators to ensure the chain has the best security possible.

Nominators back up to 16 validators by staking their tokens in validators.

If their validators are chosen to mint the next block, they’ll share in the rewards.

This increases security as it’s only profitable to stake tokens in reliable and trustworthy validators.

What can Polkadot be used for?

Polkadot’s token has 3 uses, some of which are rather exciting.

However, if you’re just going to buy Polkadot as an investment, then you likely won’t use any of these features.  

First up, DOT token holders are able to take part in the governance process.

This means that you get to vote on protocol upgrades, fixes, managing events, and generally having a say.

This is a huge feature to have access to as usually this is reserved for miners.

On other blockchains, miners control what happens by diverting their hash rate to the chain that’s going to implement the changes that they want to see.

Instead, your DOT tokens give you an actual say in what goes on.

Secondly, you can stake your DOT tokens and earn validation rewards.

Good actors and people that benefit the network are incentivized and rewarded positively, while bad actors are punished by having their staked tokens taken away.

Staking your tokens allows you to be a part of the process that keeps the Polkadot network secure.

Finally, you can use your DOT tokens for a process called bonding.

This is where you can create your own Parachains.

Think of bonding as long-term staking.

You throw a pile of DOT tokens to open up your Parachain, then when you close the Parachain, your bonded tokens are returned to you.

There you have it.

That’s all you can currently do when you buy Polkadot tokens!

What is a Polkadot wallet?

A Polkadot wallet is simply a wallet that allows you to store Polkadot in it.

Polkadot’s own blockchain has been live for just over a year now, so it’s still relatively young in that respect.

Despite this, dozens of wallets support Polkadot’s token, meaning you’re fairly spoilt for choice.

When it comes to picking a Polkadot wallet, you need to think about what you plan on doing with your tokens.

So, now you’re about to buy Polkadot, think about what you’re going to do with it.

Will you be using your tokens to take part in governance, staking and bonding, or will you just be holding for the long-term investment potential?

Perhaps you’ll be day trading Polkadot, in which case you might not want to use a wallet.

If you’re going to be involved in governance and staking, you’ll want a wallet that lets you do that, which narrows down the options significantly.

There are 2 good wallets that allow you to do this, one being far more secure than the other.

First up we’ve got Polkawallet.

This is a mobile wallet that supports Polkadot and allows you to stake your tokens directly.

You can also take part in governance voting from this wallet, which is a great feature to have.

This means that even a relative crypto novice can take part in Polkadot governance with no effort at all.

You’ll get notifications when new governance issues are ready for you to vote on, which is neat.

Next up we’ve got Ledger devices.

Polkadot is supported by Ledger Live, which you can use your Nano S or Nano X to log in to.

From there you can safely and securely hodl your Polkadot long-term without fear.

You can also stake your Polkadot from the Ledger Live app.

However, at this moment in time the governance feature has not been deployed.

Polkawallet is a mobile hot wallet so it has less security, while Ledger’s wallet is a cold wallet with more security, but you can’t currently take part in governance.

You can learn more about crypto wallets here.

How does a Polkadot transaction work?

Polkadot transactions are pretty similar to all other cryptocurrencies and blockchains out there.

But, just in case this is your first time, we’ll walk you through it.

A Polkadot block is created every 6 seconds or so, meaning that you have a good chance of having your transaction processed within half a minute.

When you’re ready to make a polkadot transaction, get the address of the recipient ready.

You can either opt to scan a QR code, paste in the address or type it out.

If you paste or type the address in the address field, triple check it as hackers can inject code that changes paste results and when typing you can make errors.

Once the transaction has been sent, there’s no way to get it back.

So, that 30 seconds or so to verify that everything is correct can save you a lot of heartache.

Once you’re happy with the address, input the amount you wish to send.

Add in any message that you wish to include and hit send.

If you have verification enabled, you’ll need to verify the transaction with a code that will arrive in an SMS or email.

Then, your transaction will make its way to the mempool, where validators will include it in a block as soon as possible.

You might have to wait for a few confirmations before it appears in the recipient’s wallet, but this won’t take long.

Are there any risks with Polkadot?

There are risks when investing in any cryptocurrency, and Polkadot is no exception.

Despite the fact that it’s a next generation blockchain and looks like it will climb into the top 3 cryptocurrencies in the near future, there are still risks attached.

Polkadot is still developing and implementing features.

And, to push features live and to pick which features come next, the token holders must decide.

This leaves potential for bad actors to acquire large volumes of tokens and swing the votes.

Also, if not enough people vote to push the best agenda, we could see poor decisions made by a handful of people that impact the network.

So, while having a totally decentralized governance feature is fantastic, it could also work against Polkadot.

This is extreme, but there is potential if someone has enough DOT tokens.

Given that the mainnet has only been live for just over a year, DOT has already returned just shy of 400% to investors.

If growth continues and more features are added that boost the network, it could turn out to be a brilliant token to add to your portfolio.

Any other risks are generated by you as a user.

Not storing your Polkadot securely and by using poor cyber security practices could see your holdings stolen.

But more on that shortly!

Is Polkadot legal? 

As it stands, no legal entities have taken aim at Polkadot yet.

This leans more towards the good side than it is bad, for the time being at least.

However, as time goes on and Polkadot becomes more popular, we could see regulatory bodies getting interested and poking around.

Even if this does happen, we shouldn’t see any fallout or trouble as Pokladot passes the Howie test and isn’t doing anything shady.

It’s fully decentralized and has the necessary structure in place to prevent it from breaking any laws.

The only way that Polkadot could be considered illegal is if your country deems cryptocurrency illegal.

The following countries consider cryptocurrency illegal:

• Algeria
• Bolivia
• Egypt
• Morocco
• Nepal

So, unless you live in one of these countries then you can assume Polkadot is totally legal and safe to use.

Is it safe to buy Polkadot?

If you want to buy Polkadot, you’ll want to know if it’s safe or risky.

Fortunately, it surged into the top 10 cryptocurrencies by market cap this year, and as a result more and more exchanges are listing it.

This means that you’ve got more choice on where to buy Polkadot.

Instead of having to head to a risky exchange, you can opt to use a reliable one.

You can currently safely buy Polkadot from the following exchanges:

• Binance
• Coinbase
• Kraken
• Huobi
• Bittrex

As Polkadot continues to rise through the ranks, we’ll see more exchanges list it.

Can someone hack me or steal my Polkadot?

Unfortunately, anything that’s stored on an electronic device can be stolen or hacked.

Everything is built by humans and as a result has flaws in it.

Some chip makers are even forced to leave back doors in their chips to allow sly entry from government entities.

As a result, hackers can expose these backdoors and get your Polkadot.

But, don’t worry too much about that, unless you’ve got a significant amount of crypto.

For the most part, you’ll be hacked as a crime of opportunity, which means you need to be prepared for the basic level hacks and attacks.

To prepare yourself for this type of cyber warfare, you only need to do a couple of things and dedicate around an hour of your time.

First up, change all your passwords to unique passwords that are 12 characters or so long.

You can use an app like LastPass or 1Password to help you with this goal.

The theory is that if you use the same password everywhere and a hacker gets hold of it, then they know your password for every website, app and service.

By using strong unique passwords everywhere, you cancel out this vector of attack.

Next up, add in 2-factor authentication (2FA) to your accounts.

This is an extra layer of security that will require you to enter an additional code every time you want to log in, buy, sell, or withdraw money from an account.

You should use a 2FA application like Authy or Google Authenticator as these are far more secure than SMS or email 2FA.

Finally, store any private keys or seed phrases that you have somewhere offline.

By keeping these codes air gapped then you make getting hacked impossible.

Seed phrases and private keys will give an attacker total control over your wallet and Polkadot.

So, by keeping this away from the internet you stop hackers from being able to get into your accounts.

There are many more things that you can do, but they are only useful if you’re the victim of a targeted attack.

If someone is actually targeting you, you’ll likely have hundreds of thousands of euros worth of crypto.

There are measures that you can take in these situations, but for the average Joe, you’re best off hiring a cyber security expert to help you out.

But, for the most part, following these 3 simple steps will make you hard enough to hack that most hackers won’t bother with you.

Unless it’s personal, of course.

How can I buy Polkadot?

If you want to buy Polkadot, then you’ll be presented with a range of options.

The growing cryptocurrency is being listed on more exchanges every week, and as it continues to rise, other exchanges will follow suit.

For the time being, most stockbrokers don’t offer the ability to buy Polkadot, so we’ll just examine exchanges and buying Polkadot in person.

Using an exchange is obviously preferable and safer, but we know that people like to have their anonymity preserved.

If you’ve never bought cryptocurrency before, we don’t recommend buying Polkadot in person.

You could get caught up in all types of scams, so leave buying crypto in person to the more experienced.

Buy Polkadot with an exchange

The safest and fastest way to buy Polkadot is with an exchange.

There are multiple exchanges that offer Polkadot markets, so you’re not too strapped for choice.

More exchanges are listing Polkadot as time goes on, which is a good sign.

To buy Polkadot at an exchange, you’ll need to either sign up or log in to an exchange that supports Polkadot trading.

Currently, these exchanges will allow you to buy Polkadot:

• Binance
• Coinbase
• Kraken
• Bittrex

Once you’re in, you can then navigate to the Polkadot market, input the amount you wish to buy and hit buy.

It’s that simple to buy Polkadot with an exchange.

Once you’ve done that, we suggest that you move your Polkadot tokens to a wallet that you control.

Exchanges have a bad reputation and are not safe for long-term crypto storage.

Buy Polkadot in person

If you’re a bit more experienced and like to live on the wild side, you can opt to buy Polkadot in person.

You’ll need to find someone from a Polkadot forum to meet with you, but once you do that, it’s simple.

Arrange a meet during the day in a public area to give yourself a bit more safety.

You can then pay in cash or another cryptocurrency – it all depends on what you arranged.

Take a person with you to the meet to deter any bad actors from taking advantage of you.

If you opt for cash, have a 3^rd person wait around the corner until you confirm that the Polkadot is legitimate, and the transfer will go ahead.

Make the transfer as safe as you can and don’t take unnecessary risks. 

How can I pay for Polkadot?

Depending on where you opt to buy Polkadot from, you will have a choice of payment methods.

If you’re going to use an exchange, you’ll be able to use your credit or debit card and sometimes PayPal.

Kraken will allow you to use cash to fund your account if you live in Canada.

Alternatively, if you’re going to buy Polkadot in person, you can pay using whatever payment method the seller is willing to accept.

This could range from cash to magic beans.

So, let’s examine the payment methods you can use to buy Polkadot.

Credit/debit card

Virtually all cryptocurrency exchanges will allow you to buy Polkadot using your credit or debit card.

Simply verify your identity and you’ll be able to deposit to your account with your card.

These types of deposits are instant and usually come with a fee of up to 5%.

Most card issuers will give you a daily spend limit on your card, meaning that this isn’t the ideal deposit method for large sums of money.

Not to mention the deposit fee for the card will eat up a large chunk of that change.

So, if you want to buy Polkadot in small amounts, card deposits are the way to go.

Bank transfer

If you want to buy Polkadot in bulk, then you’re going to want to use a bank transfer.

Bank transfers will take around 3 working days to complete and become available in your exchange account.

But, they’re also free to make.

Most crypto exchanges will give you a choice of banks to use, so you can find one with better speeds and locations for you.

Owing to the time delay, bank transfers are not ideal for small Polkadot purchases.

PayPal

Some cryptocurrency exchanges will allow you to deposit using PayPal.

It’s a neat alternative to using your card and gives you an extra layer of security.

If you live in a region with a banking ban on crypto, using PayPal to buy Polkadot will allow you to get around it.

The fees are often the same as card deposit fees, so don’t be surprised if you have a fee slapped on your deposit.

PayPal deposits are instant and have no limit.

You simply login to your PayPal account just like you do when you check out with PayPal at any other website.

It’s simple, quick, and easy, so try it out if you get the chance!

Cash

If you’re using Kraken from Canada, you’ll be able to head to Canada Post and deposit in your account with cash.

This is unique to Kraken and is well worth taking advantage of.

Also, if you opt to buy Polkadot in person you’ll be able to pay in cash.

It’s nearly impossible to track cash transactions, so this is definitely the path you need to take if you’re going to remain anonymous when you buy Polkadot.

If you do opt to walk around with a lot of cash in your pocket for either of these 2 reasons, make sure you’re extra careful.

Travel with a friend if you can for extra protection.

Are profits from Polkadot taxed?

Polkadot is still fairly young, so making profits should be fairly commonplace.

So, you will likely be looking at the reality of having to pay tax sooner or later.

Get ahead and see whether you have to pay taxes on Polkadot profits or not with CryptoMeister.

After all, it never hurts to plan for the future when you buy Polkadot!

Generally speaking, if you live in a country with capital gains taxes, you’ll need to pay taxes on your Polkadot profits.

If this is the case, you’ll also be able to claim capital loss if you make a loss on your Polkadot trades.

Some countries have crypto tax frameworks in place, which can give you a discount on your crypto tax bill.

Countries such as Australia, Germany and Malta will reduce your crypto tax bill up to 100% if you hold crypto for more than a year.

If tax doesn’t exist in your country, then you can presume that you don’t need to pay any taxes.

You can learn more about crypto taxes here!

Is Polkadot a good investment?

Obviously before you buy Polkadot you’ll want to know if it’s a good investment or not.

If Polkadot keeps up the good work and sticks to its goals, then it will be a good investment in the long run.

Polkadot looks set to break into the top 5 cryptocurrencies in the medium-term and into the top 3 long-term.

It’s the biggest blockchain innovation since Ethereum.

As long as development continues and Polkadot suffers no issues, then it should be a top performer in your crypto portfolio.

Can I invest in Polkadot with leverage?

Leverage trading is becoming more popular, especially as more people become more adept at trading crypto.

So, if you wish to buy Polkadot on leverage, you can do so at Binance.

You can open a leveraged DOT position with 10x leverage.

Interest is charged every 4 hours and you will get liquidated if the market moves against your position.

At the moment, crypto markets are highly volatile, so your position could get liquidated within seconds.

This is an unwise decision as Polkadot looks more promising on the medium to long-term scale.

Always be careful when trading on leverage as you can lose a lot of money quickly.

Can I day trade Polkadot?

Cryptocurrencies that are more volatile make for the best day trading currencies.

Owing to the fact that it’s still relatively young, Polkadot is packed full of volatility.

A 24-hour change of 10% is not strange for Polkadot, so day traders can fill their boots.

The aim of day trading is to take advantage of small movements in the market over a short period of time.

On the 5-minute charts, Polkadot is a hive of activity, with 5% candles being a regular occurrence.

This provides day traders with ample opportunity to turn a profit.

However, day trading takes skill and years of practice, so do practice on a demo account before you dive in.

If you don’t have the experience under your belt, you can lose a lot of money in a short space of time.

Is Polkadot a good long-term investment?

Polkadot is incredibly exciting and it’s one of a kind.

However, it’s still fairly new.

This means that it’s still got a long way to go and the best is yet to come.

As a result, Polkadot looks like it will be an incredible investment for the long-term.

We’ve already seen it rise just shy of 400% in 1 year, so imagine what it will do in 5 years.

Once more features are live, and more people are using Polkadot it will skyrocket in value.

It’s one of the most exciting blockchains around at the moment and people are calling it the greatest blockchain creation since Ethereum.

If you’re looking for an addition to your long-term portfolio, buy Polkadot!

Polkadot VS. other cryptocurrencies

Polkadot stands out from the crowd as it’s a next generation blockchain solving blockchain’s biggest issue – interoperability.

It does it in an elegant, simple, and fun way, which is part of the reason it’s already so famous.

There’s nothing else out there doing what Polkadot does, so it has total dominance.

As Polkadot grows and its technology evolves, we will likely see other projects borrow the code and create their own version of Polkadot.

But, these will not live up to Polkadot, at least with what we’ve seen so far.

What does Polkadot’s future price look like?

It’s always tricky to put a potential price on a cryptocurrency, especially one that’s still developing and growing like Polkadot is.

That being said, Polkadot and its DOT token are still young.

Polkadot is also packed full of potential, and we could easily see it 10x in value within 5 years.

Polkadot is a one-of-a-kind, next generation blockchain that offers incredible opportunities for communities.

If all goes to plan, it wouldn’t be unreasonable to call Polkadot at €500 and beyond in the long-term.

But, Polkadot is more than just an investment.

The DOT token is designed for you to have a say in the network and to use this powerful technology.

So buying it just for the money is almost a shame.

If you’re going to buy DOT and hold it for the long term to take advantage of the potential price gains, consider staking your tokens.

After all, you’ll earn more in the process, and you’ll help the network remain secure.

That way everyone’s a winner!

There are several Polkadot wallets that will let you do this, including Ledger’s models.

How is the supply and demand of Polkadot?

Polkadot has a fixed supply, which means that you’re not going to get any nasty surprises later down the line.

Some cryptocurrencies have no hard cap on the max supply and are therefore known as inflationary cryptocurrencies.

These tend to remain more stable in terms of price and it also caps their max potential.

Polkadot’s max supply is fixed at 10 billion DOT, which sounds like a lot, but it’s not that bad.

It began at 10 million DOT, but in order to stop using lots of decimal places, they held a redenomination.

This solved the issue, and the token distribution was not impacted.

In terms of demand, it’s still growing.

People are still discovering Polkadot and its use case is still growing.

As a result, the demand is there, but it’s not as strong as it will be in the coming months and years.

The total supply is slowly dripped out as block rewards, so the supply and demand are balanced.

This means that one bit of good news or development for Polkadot tips the scales in the favor of demand and the price rises.

Challenges ahead for Polkadot

All blockchains face a certain degree of challenges, but it’s always fairly unique.

Before you buy Polkadot, you might want to assess whether it has any issues that you think could cripple it.

For the time being, Polkadot looks like it should sail through without any issues.

It doesn’t really break any rules and isn’t in danger of doing so.

But it could fall victim to overregulation, if that time ever comes.

So, let’s take a look at a few challenges that it could face!

Laws and regulations

Polkadot doesn’t really fall foul of any laws and regulation wouldn’t hurt it too badly.

This is because its main purpose is to facilitate cross-chain interoperability.

The only way that laws and regulations could hurt Polkadot is if they prevent people from earning tokens from staking.

This would disincentivize staking and would harm the consensus mechanism as well as network security.

But, this isn’t likely to happen, it’s more of a worst case scenario.

Competing currencies

As it stands, Polkadot is virtually one of a kind.

This means that there are no competing currencies even close to achieving what Polkadot can do.

But, in the future we could see people fork the open-source code and make changes.

They could then develop a superior version of Polkadot.

But, if we’ve learned anything from the various forks of Bitcoin, it’s rare for forks to be better than the real deal.

Educating users

Polkadot is a powerful and ambitious project.

But, to fully understand Polkadot and its uses, there needs to be a certain level of understanding.

In order for the network to be as secure as possible, people need to stake their DOT.

If people are unaware of this and the true utility of DOT, we could see the majority of tokens not staked, which could open the network up to attacks.

As time goes on, people should become more educated with blockchain and crypto, but Polkadot still needs to do a better job at explaining itself to the man on the street, rather than just developers.

Polkadot is shaping the future

Polkadot is without a doubt one of the most exciting cryptocurrencies out there.

It has untold potential that most of the world has not yet realized.

Once it’s fully developed and operational, we’ll see Polkadot climb up the rankings and break into the top 5.

There is very little that can stop Polkadot reaching its goals and dreams, and we’re excited to see what its future looks like.

Polkadot definitely looks like a great buy for the future!